Who is involved?

What makes it special?

With more than 660,000 metric tons of wastewater biosolids produced in Canada every year, finding economically viable ways to process these safely has become a national priority. Deals such as Hamilton prove that using private finance as a way of accessing cutting-edge technology and innovation is gaining momentum as a mainstream solution.

The winning bid was the only one which came in under the client’s pre-determined affordability threshold, partly thanks to the developer’s extensive experience of operating similar plants elsewhere in North America. This confidence gave the lenders added comfort during the debt negotiation phase, resulting in a keenly priced commercial debt package.

Financing the Hamilton biosolids project using private capital has given other clients a valuable reference point, and the successful financial close of an even larger project in British Columbia in February 2018 proved beyond all doubt that private finance has a vital role to play in the delivery of quality, affordable biosolids projects. The potential for enhanced financial returns through the sale of the pelletised end product as organic fertiliser is the icing on the cake.

Kigali Bulk Water Supply project financing, Rwanda

What is it?

The $60.8 million financial package assembled to fund the construction of the 40,000m3/d Kigali surface water treatment and supply project.

Who is involved?

The facility is being built, owned and operated by project developer Metito, which provided $20.2 million in equity funding. 18-year debt was provided by the African Development Bank ($19 million) and the lead arranger, the Emerging Africa Infrastructure Fund ($21.6 million). The project was rolled out by the Rwandan Water and Sanitation Corporation (WASAC) under a 27-year BOT contract.

What makes it special?

As the first water PPP in Rwanda, and the first time private finance has been used for inland surface water treatment infrastructure in Africa, the financial close of the project is a key milestone in averting a looming water crisis for one of Africa’s fastest-growing cities. It offers a timely reminder that well-structured PPPs can make a huge difference to vital infrastructure provision in emerging markets.

A tenacious approach from the developers overcame contracting inertia and institutional challenges – including the arrest of WASAC’s chief executive over corruption charges – to put the seal on a deal in the most difficult of circumstances.

By involving institutional lenders on a fully commercial basis, the completion of the financing package shows that development funding and PPP structures can blend together seamlessly, and opens intriguing new avenues for structuring infrastructure deals in African markets where the risk factor has traditionally hampered financial innovation.

Shoaiba 3 Expansion 2 financing, Saudi Arabia

What is it?

A $325 million financial package negotiated to support the construction of the 250,000m3/d reverse osmosis expansion to the Shoaiba 3 independent water and power project in Saudi Arabia.

What has it done?

The expansion is 100% owned by ACWA Power. Funding was provided on an 85:15 debt-to-equity basis, with the dual-tranche 25-year US$ debt package split among six lenders: Bank of Tokyo-Mitsubishi, KB Insurance, Korea Development Bank, Natixis, Samsung Life Insurance, and Standard Chartered. Water will be supplied to Water and Electricity LLC (WEC) under a 25-year take-or-pay arrangement. Negotiations were led by WEC’s lead advisor Synergy Consulting.

What makes it special?

The new plant will deliver water at the lowest ever offtake price for an SWRO facility in Saudi Arabia. By using design efficiencies to undercut existing water prices by up to 30%, the project rewrites the rules for water pricing in the Kingdom.

The package was negotiated while one of the key contractors – Abengoa – was going through bankruptcy proceedings. Through sophisticated negotiations and a substantial amount of bespoke structuring, the key negotiators succeeded in assuaging the lenders’ fears without compromising the bold long-term nature of the debt package.

The deal marks the first time that Korean institutional lenders have financed a major desalination project which involved no Korean contractors, and the fact that Korean insurers were taking greenfield project exposure in the Middle East for the first time required significant hand-holding in order to get them comfortable with the risk allocation. The resulting deal opens up an exciting new source of liquidity for debt-hungry regional infrastructure markets.

Umbulan Spring Water Project, Indonesia

What is it?

An IDR2.3 trillion ($170 million) funding package to support a 345,600m3/d privately financed water treatment and transmission project supplying five cities in East Java, Indonesia.

What makes it special?

For almost 45 years, the Umbulan Spring water project has been passed between public and private hands, hamstrung by budget shortfalls, regulatory confusion, and the complications of negotiating with city, regional and national governments. The project’s successful financial close is a major political coup for President Jokowi’s administration, which pushed through enabling legislation in 2015 and prioritised the project at the highest possible levels of government.

As the largest privately financed water infrastructure project since the 1997 Jakarta concessions – and the first to benefit from either VGF or a government guarantee, the Umbulan project is a watershed moment for Indonesia’s long-held PPP ambitions. The project guarantees address a whole gamut of investor fears, while still allowing an attractive 14% IRR.

Umbulan Spring also marks an important milestone for the international development finance institutions active in Indonesia. The IFC helped design the financial model and, alongside the ADB and KfW, helped set up the IIF. The IIGF and PT SMI, meanwhile, are both supported by the World Bank. The next step is to crowd in commercial funding, and PT SMI and IIF are negotiating with commercial banks to join a bridge financing scheme for the VGF support.